2017 BAN Vs 2021 CBDC: Cryptocurrency in India
The first alarm sounded by Indian policymakers was Bitcoin and other private cryptocurrencies in 2017. One year later its central bank, the Reserve Bank of India, banned crypto accounts.
This affected to a large extent local crypto companies and even retailers. However, in March the Supreme Court of India ruled that the move was unconstitutional, only in view of the crypto boom following a rally of Bitcoin in 2020.
In the cryptographic product and services business, the nation currently has about 342 companies. Following the 2020 Supreme Court decision, the majority of these crypto-centered “startups” mushroomed over the ban.
One year after the ban was lifted, almost $13.9 billion entered the industry and created nearly 7.5 million active traders. Even the country’s average volume of trade has therefore increased by 500%.
Read more on Indian exchanges before and after the crypto bill
Crypto firms and the Indian Government
An industry that, to say the least, is still emerging may be shocked by a current ban. As the director of Blume Ventures Arpit Agarwal advises Unocoin that he has invested in Bangladesh-based cryptography: if regulators allow for prohibition, the Indian crypto community will return to its position in 2018. He thought that his best efforts were to educate legislators.
Nirmala Sitharaman, Indian Minister of Finance, recently gave the crypto sector hope a recent comment. She further said that regulators did not “close their “minds”: We want to make sure there is a window for all sorts of experiments in the crypto-world.”
Read more on the Indian Government response to cryptocurrency!
The position on cryptocurrency will be very calibrated. Fairly speaking, RBI plans to issue a digital rupee, a project similar to China’s e-Yuan, which are parallel to the most recent proposal to ban encryption. The CBDC “receiving full attention,” according to the Governor of the Central Bank, Shaktikanta Das.
The focus has increased on Bitcoin and other private cryptos, like Ethereum. This increased the overall crypto market share by over $1 trillion, largely because of a trillion dollars surge in Bitcoin’s own market capital.
Read more on Crypto market value tops $1 trillion
As India is the 11th nation in terms of adopting cryptography, a heavy-handed decision could lead to problems behind doors. Some believed the prohibition would have an impact on real companies that “completed the government” or on investors who “disclosed their holdings,” and on the rest of the sector, on “unregulated grey markets.”
CBDC in India
As a probable alternative to the financial ecosystem, crypto-monetary assets came into play after the 2008 global financial crisis. Various crypto-assets have various cases of use.
Of the thousands of crypto-assets, one prototype, known as the CBDC, has a value attached to the native currency of a country. Most of the CBDCs are centralised, issued and regulated by a monetary authority in a country. No country in the world has yet been officially launching a central bank supported digital currency, apart from the Bahamas and its “Sand Dollar.”
However, many central banks have launched pilot programmes and research projects to determine the viability and usability of CBDC, the most prominent being the People’s Bank of China Digital Currency Electronic Payment (DCEP), which is currently testing digital-yuan prototyping.
Bank of England (BOE) was the first major central bank to launch a CBDC proposal based on technology associated with blockchain. The central banks of other countries, such as the Bank of Canada, the Chinese People’s Bank and central banks, have tried to keep pace, among other countries, such as Uruguay, Thailand, Venezuela, Sweden and Singapore.
CBDC is an option in India which regulatory bodies have taken into account for a long time. RBI had floated with a government-backed digital currency when its central bank, the Reserve Bank of India (RBI), imposed it.
The road ahead for cryptocurrency trading in India
Recently the Indian Government has considered banning all crypto-currency assets (either private or otherwise) and once again introducing a digital rupee. However, Minister of Finance Nirmala Sitharaman also said during the weekend that the government is considering a “calibrated” approach to cryptography—a sign that encourages industry.
Crypto as an asset has enormous potential and can help India earn significant revenues if properly administered. Furthermore, the government will only help develop a robust CBDC by using open-source cryptography.
Does India have room for both CBDC and Bitcoin?
The global market for cryptocurrency is now worth US$1.6 trillion at the macro level. There are close to 75 lakhs in India—or 7.5 million Indians who invest in crypto assets and over 340 companies now offer bitcoin and other products and services for digital currency.
Read more on India getting infatuated with Bitcoin!
Many of these crypto companies have been founded by startups in the wake of RBI’s March 2020 banking ruling of the Supreme Court. A local news portal reported that since the Supreme Court decision, the average trading volume has risen by 500%. Further, in 2020, investments in the amount of $24 million flowed into crypto enterprises according to Venture Intelligence.
The new technologies would lose a lot if the government was to go ahead and draw up a bill prohibiting the trading of crypto assets. This sector employs people, lawyers, accountants, software developers, who, in one blink of an eye, are made unemployed.
Several noteworthy risk capital investors are keen to emphasise the cryptocurrency industry in India that would have to look elsewhere. India has every means of becoming a world leader and the country could be rescued by at least a decade from that potential ban.
Our request for the Government to regulate crypto equipment as a store of value and not as a currency would be one of the key actors of India in this industry. We would like to engage in dialogues with the interested government stakeholders and help the country take its rightful position on the global cryptographic stage.
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